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China Q3 GDP growth seen hitting 1-year low, raising heat on policymakers

China Q3 GDP growth seen hitting 1-year low, raising heat on policymakers
© Reuters. FILE PHOTO: Workers labour at a construction site in Shanghai, China July 12, 2021. Picture taken July 12, 2021. REUTERS/Aly Song

By Kevin Yao

BEIJING (Reuters) – China’s economy likely grew at the slowest pace in a year in the third quarter, hurt by power shortages, supply bottlenecks and sporadic COVID-19 outbreaks and raising heat on policymakers amid rising jitters over the property sector.

Data released on Monday is expected to show gross domestic product (GDP) grew 5.2% in July-September from a earlier – the weakest pace since the third quarter of 2020 – weakening from 7.9% in the second quarter, a Reuters poll showed.

That would mark a further deceleration from 18.3% expansion in the first quarter, when the year-on-year growth rate was heavily flattered by the very low comparison seen during the COVID-induced slump of early 2020.

On a quarterly basis, growth is forecast to ease to 0.5% in July-September from 1.3% in the second quarter, the poll showed.

The world’s second-largest economy has rebounded from the pandemic but the recovery is losing steam, weighed by faltering factory activity, persistently soft consumption and a slowing property sector as policy curbs bite.

“The potentially faster-than-expected economic slowdown, driven by energy shortage and the contagion effect owing to a potential Evergrande default, will require further easing of monetary policy,” Citi economists said in a note.

Global worries about a possible spillover of credit risk from China’s property sector into the broader economy have also intensified as major developer China Evergrande Group wrestles with more than $300 billion of debt.

Chinese leaders, fearful that a persistent property bubble could undermine the country’s long-term ascent, are likely to maintain tough curbs on the sector even as the economy slows, but could soften some tactics as needed, policy sources and analysts said.

Premier Li Keqiang said on Thursday that China has ample tools to cope with economic challenges despite slowing growth, and the government is confident of achieving full-year development goals

Analysts polled by Reuters expected the PBOC to keep banks’ reserve requirement ratio (RRR) unchanged in the fourth quarter, before delivering another 50-basis points cut in the first quarter of 2022.

China releases third-quarter GDP data on Monday (0200 GMT), along with September factory output, retail sales and fixed-asset investment.

September industrial output is expected to rise 4.5% from a year earlier – the lowest since May 2020. Retail sales growth is expected to pick up to 3.3% from 2.5% in August.

Source: Investing.com

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